Don & Moe's Pizza operates a small chain of restaurants in the Southwest. Its owners, Don and Moe, have been struggling for ways to make more oney during the slowest parts of the week. Research has shown that Tuesday, Wednesday and Thursday nights are the slowest -- pizza sales can be as muchas 40% lower on those evenings as compared to busy nights like Friday and Saturday (and Sundays, where people like to get pizzas for the game(s)). Moe, who took ACT 202 with Professor Carstensen, figured that they could run a special on those evenings. The "Moe Betta Special" would give customers a large pizza for $8.99, as long as the customer picked up the pizza themselves. Don, who went to Palomar, thinks the idea is crazy: a large normally sells for $16.99. Monthly Cost Data is Provided for You: Per Unit 30,000 Direct Materials 3.75 112,500 Direct Labor 2.86 85,800 Overhead* 2.38 71,400 Cost of Goods Sold 8.99 269,700 *.55 per unit is considerd variable overhead; the rest is fixed Monthly Income for Large Pizzas Only: Per Unit 30,000 Sales 16.99 509,700 Cost of Goods Sold 8.99 269,700 Gross Margin 8.00 240,000 SG&A Expenses** 173,700 Operating Income 66,300 ** 1.19 per unit is considered variable SG&A; the rest if fixed

Part 1: If Dom & Moe's undertakes the "Moe Betta Special" what will be the incremental Operating Income? (9 points) You will need to consider Variable Costing.

Part 2: What are some other considerations Moe should consider along with this special? (6 points) Please list at least three considerations on the next page.